INCORRECT ANSWER --> 0.18 times

10. A firm wishes to maintain an internal growth rate of 7.1 percent and a dividend payout ratio of 30 percent. The current profit margin is 5.5 percent, and the firm uses no external financing sources. What must total asset turnover be given the internal growth rate of 7.1 percent? a. Profit Margin = Net Income / Sales Net Income = 0.055 x Sales b. Retention Ratio = 1 - Payout Ratio =1-0.3 = 0.7 c. Internal Growth Rate = (Return on Assets x Retention Ratio) / [-(Return on Assets x Retention Ratio)] 0.0071 = [ROA x 0.7]/[1 ROA x 0.7] 0.0071 ROA x 0.00497 = ROA x 0.7 0.0071 = ROA X 0.70497 ROA= 0.01007135 or 1.007% d. ROA = Profit Margin x Total Asset Turnover 1.007% = 5.5% x Total Asset Turnover = 0.183 times